The majority of consumers in the U.S. don’t have enough life insurance. Many in fact have no life insurance at all, this in spite of the fact that most agree that they need life insurance.
When asked why they don’t purchase life insurance in a recent survey, the number one reason consumers cited was that they had other, more important financial priorities—in other words, they thought they couldn’t afford it. Most respondents in that survey were surprised to learn the facts about life insurance, including the fact that premium costs were far less than what they believed.
Some Surprising Statistics about Life Insurance
According to statistics gathered by ThinkAdvisor, the percentage of American households with life insurance has been in decline for more than half a century. In 1960, for example, 72% of U.S. households had individual life insurance. By 1992, that number had dropped to 55%, and less than 20 years later, in 2010, only 44% had life insurance.
What’s surprising about these numbers is that the vast majority of consumers agree that most people need life insurance, more than 85%, in fact—and 40% of Americans who have life insurance think they don’t have enough. That means, of course, that millions of Americans who believe they need individual life insurance aren’t purchasing it, or aren’t purchasing enough, which begs the question, why the disconnect? Why, in other words, would so many consumers agree that a product is valuable, and that they need it, but fail to follow through?
Most Americans Fail a Life Insurance IQ Test
As the number and percentage of Americans who carry a life insurance policy has decreased, misconceptions about life insurance have increased. In one recent study, for example, a group of consumers were administered a relatively simple life insurance IQ test.
The test, created and administered by the Life Insurance Management Research Association (LIMRA), included ten true or false questions testing such things as whether beneficiaries must pay taxes on death benefits, the difference between permanent and term life insurance, and whether employer-based life insurance policies remain in effect after you leave a job.
More than 70% of consumers failed the test. In fact, more than half answered fewer than five of the ten questions correctly.
Why You Need Life Insurance
According to LIMRA research (Household Trends in U.S. Life Insurance Ownership, 2010), more than 7 in 10 U.S. households with children under the age of 18 would be in financial trouble, unable to meet everyday living expenses, within a few months if the primary wage earner were to die. Of respondents in that survey, 40% agreed that they would immediately be unable to meet everyday living expenses. Given those dire predictions, LIMRA decided to ask people the obvious question: why aren’t you purchasing life insurance?
The Cost of Life Insurance Is the Most Common Misconception
When American consumers need a new car, they check with several car dealers and compare costs. When they need life insurance, however, they tend to make untested assumptions, and all too often, they assume that life insurance costs more than it actually does.
In fact, almost 85% of consumers in a recent survey said they didn’t buy life insurance because it was “too expensive”—but when asked how much life insurance would cost them (given their age and health condition), they estimated that a life insurance policy would cost three times more than the actual price. For example, when asked how much a healthy 30-year old would pay annually for a 20-year, $250,000 level term life policy, the average response was $400. Based on industry standards, the actual annual cost of such a policy is $150.
Because you care about your family, you do everything in your power to ensure that they will enjoy the best quality of life you can provide—but that means taking responsibility to make sure they’ll be provided for if you’re no longer here to provide for them. If you’ve been avoiding purchasing an individual life insurance policy because you think you can’t afford one, you owe it to yourself—and to your family—to meet with a reputable insurance agent, to find out what your options are, and what you can afford.
At Axella Insurance Services, we understand your concerns and will take the time to address them, to answer all your questions and provide you the facts you need to make an informed decision. To meet with a life insurance specialist you can trust, or to get a quote, contact us today.